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CS Professional · Strategic Management and Corporate Finance · Foreign Funding - Institutions

A listed Indian company wants to raise equity from overseas investors by having its rupee-denominated shares held by a domestic custodian while negotiable certificates are issued abroad against them. Which instrument does this describe?

The instrument is a Global Depository Receipt. The Indian company's shares are held by a domestic custodian, and an overseas depository issues negotiable certificates against them to foreign investors. This lets the company raise equity abroad without issuing the shares directly to those investors.

  1. AForeign Currency Convertible Bond
  2. BGlobal Depository ReceiptCorrect
  3. CIndian Depository Receipt
  4. DExternal Commercial Borrowing

Explanation

In a GDR the issuing Indian company's shares are deposited with a domestic custodian and an overseas depository issues negotiable certificates against them to foreign investors. An FCCB is a debt instrument convertible into shares, so it is wrong. An IDR works in the opposite direction, as it is issued in India by a foreign company.

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